A free trade zone for high quality Australian food exports may be a win-win for Australian farmers and China’s burgeoning middle class. NAB’s Cathryn Carver, Acting Chief Customer Officer – Corporate and Institutional Banking, explains why.

In the near future, a Bonded Free Trade Zone (BFTZ) could allow Australian agribusinesses to get their produce into China faster, more easily and more cheaply. Announced in April 2016[1], the zone is an initiative of the Australia Sino One Hundred Year Agricultural and Food Safety Partnership (ASA100).

Slated to be set on an island off the coast of Shanghai, the aim is to expedite the export of Australian agriculture and food directly into China.

ASA100 (Australia) Co-Chairman Andrew ‘Twiggy’ Forrest has described it as “a very innovative concept that’s great for China and great for Australia and potentially the most meaningful, solid development, given both countries are continuing to encourage it, to come out of the ChAFTA [Australia-China Free Trade Agreement] to date”.[2]

NAB strongly supports its creation. Cathryn Carver, NAB’s Acting Chief Customer Officer, Corporate and Institutional Banking, and Deputy Chairman of ASA100 Ltd, explains to Agri View why Australian farmers should also be excited by the prospect of the new free trade zone.

How would the BFTZ be a game changer?

Australia already exports lots of agricultural products to China. However, this is about making the supply chain much more efficient. The BFTZ will be a one-stop shop, allowing goods to pass through customs and quarantine quickly.

That shortens the time for produce to go from an Australian paddock to a Chinese consumer’s plate. It then becomes feasible to export highly perishable goods, for example, fresh milk. Also, the BFTZ facilitates disintermediation – that is, the shortening and simplifying of ­the supply chain. That should mean costs fall. That may make it commercially worthwhile to start exporting lower-margin agricultural products.

So, the BFTZ could act as the ladle for Australia’s food bowl?

Former trade minister Andrew Robb once said it’s more realistic for Australia to be Asia’s gourmet deli basket than its food bowl. Australia accounts for 1.1 per cent of global agricultural production[3]. To put it another way, Australian farmers currently feed an estimated 60 to 80 million people[4] and Asia has around 4 billion people[5]. Part of the reason the Chinese have been willing to grant Australian exporters such free access is that they don’t have to worry about them flooding the market.

There’s plenty of room for export volumes to grow then?

The significance of this free trade zone cannot be overstated. This is an extraordinary opportunity for Australian producers – not to mention Chinese importers – who want to bring the best of what Australia produces deep into China. They will be able to get Australian products onto shelves across China quickly and efficiently.

So while the food bowl rhetoric might be overblown, the ‘dining boom’ talk isn’t?

Food, beverages and fresh produce exports reached nearly $27 billion in 2014-15, an increase of almost $4 billion from the previous year.[6] Now consider the forecasts that China will be responsible for 43 per cent of global growth in demand for food.[7] Plus, the real value of food consumption in China is projected to increase by 104 per cent.[8] That reflects a dietary shift towards higher quality, more nutritious food as the population becomes more affluent. As significant as agricultural exports to China already are, we’re only beginning to scratch the surface.

Hence the enthusiasm Andrew Forrest, among others, is showing for getting the BFTZ up and running within the next 12 months.

Andrew is committed to continuing to revitalise Australia’s agricultural sector. He sees enormous opportunities to cement our reputation as the world’s most reliable supplier of safe, premium agricultural food products.

According to the Australian Bureau of Agricultural and Resource Economics and Sciences [ABARES], the growth of demand for food in China to 2050 is expected to top A$1 trillion.[9] That will be driven by rapid urbanisation and the proliferation of middle-class consumers.[10] Andrew believes that Australia – with its pristine provenance – is poised to take continued advantage of this surge in growth.

Why is NAB backing the BFTZ?

NAB has a relationship with around one in every three Australian farmers. That being the case, it makes sense for my colleagues and I to devote ourselves to increasing and improving trade and investment flows between China and Australia, particularly in the agri-food arena.

About the Author

Agribusiness View is NAB’s online publication designed to provide our agribusiness customers with the latest economic updates, business trends and case studies specific to their industry. Regular updates include reports, case studies and articles covering such topics as international trade, finance, succession planning and superannuation - all with the objective of helping you run your agribusiness.